Question

Use the table below to calculate core and headline inflation in each time frame relative to the base year, assuming that each category is weighted equally in the calculation of headline inflation. Instructions: Round your answers to the nearest whole number. Food and energy Other goods and services Core inflation (relative to base year) Headline inflation (relative to base year) 2012 118 104 % % 2016 103 105 % % Instructions: Round your answers to one decimal place. Core inflation Headline inflation 2012−2016 % %

Answer 1

year	Food and energy	Other goods and services	Core inflation (relative to base year)	Headline inflation (relative to base year)
2012	118	104	4%	11%

2016

103

105

5%

4%

year	Core inflation	Headline inflation
2012-2016	1%	- 4%

2012 to base year:- Core inflation = 4% (104 − 100) .

Headline inflation:- [( 118/2+ 104/2) - 100] = 11% inflation.

2016 to base year: Core: (105 − 100) = 5%.

Headline: [(105/2 + 103/2) - 100] = 4% inflation.

2012 to 2016: Core inflation : (105 − 104)/104) × 100 = 0.9%.(1%)

Headline inflation: 0.9% and (103 − 118)/118) = -12.7% food and energy.

Therefore; [(0.9+ [(12.7-0.9) - 100)])/2] = -3.7% (4%)